Survey examines effect of pandemic on commercial lines and the adoption of new tech

Research published by the Italian Insurtech Association (IIA) on the impact of Covid-19 has found that the adoption of digital technology has increased among insurers.

However, the study, which was conducted in partnership with PwC, concluded that the pandemic accelerated an existing trend rather than creating a new way of working.

Technology innovations have transformed the processes of all industrial sectors in recent years, although the insurance market has typically adopted these technologies at a slower rate than most other industries.

The pandemic has though provided the impetus for further change, with all market players facing unexpected scenarios and general disruption, and the Italian insurance industry has seen an increase in the level of innovation in products and services.

It was against this backdrop that the IIA and PwC launched their joint research project, with the aim of highlighting the impact of the pandemic and the drivers of technological change during 2020 in the commercial lines business.

According to the IIA and PwC, the project’s main objectives were to analyse whether changes to the health and socioeconomic contingency could become part of a ‘new normal’ and lead to a greater focus on technology-enabled innovations such as big data, artificial intelligence and blockchain, which are fundamental for accessing and sharing information.

A further objective was to evaluate how the commercial lines market is likely to evolve in the coming years and how these changes may impact the overall insurance industry.

The survey was conducted on three user groups – technology providers and the evolution of their offerings; insurance companies and changes to their operational processes; and insurance intermediaries and changes to their commercial strategy and treatment of customers.

The survey showed that there was a strong inclination to use digital channels in all phases of the underwriting and policy management process but with one major discriminating factor – client data.

For some processes such as budgeting, underwriting and policy changes, customers are fully able to proceed autonomously through these digital channels. However, when faced with more complex processes that require more detailed information, such as pre-sales consultancy, claims or requests for assistance, they are unable to have the same autonomy and are forced to request phone assistance. Technology is therefore a facilitator, not a substitute for human interaction, concluded the survey.

The research also found that the pandemic has induced an increased attention among companies on risk assessment, with two main consequences – a greater attention to health needs and a change in the risk paradigm caused by greater awareness of new risks critical to the company.

On the first front, many companies introduced pandemic-related expense reimbursement schemes in addition to corporate health plans (for example, tampon reimbursement or intensive care per diem) and developed telemedicine channels to guarantee remote support and assistance.

The change in work habits and the move to working from home have also changed individual needs and companies have moved to a broader concept of personal wellbeing that includes mental health and wellness.

With regard to the changes in risk perception, the pandemic has destroyed the concept of “calculated risk”, which led many companies to erroneously consider risks as a finite set delimited by experience. The last few months have also increased awareness of certain lines such as business interruption, which have not always been widespread in the Italian market. Today, these are much more sensitive areas for both insurers and insureds.

Did the pandemic therefore represent a true disruption? In truth, none of the survey respondents stated they had changed their strategic direction, but all agreed that the pandemic had accelerated trends already underway. Nothing in the current insurance landscape is a new invention born as an immediate consequence of Covid 19, rather it is the emergence of processes that seemed futuristic until a few years ago.

Nonetheless, while not entirely new, it is undeniable that some process changes, such as the use of video reports and video inspections, have been significant innovations for the insurance industry.

The increased awareness of insurance coverage has also increased demand and new players are entering the market, especially in the commercial lines sector. The typical example is that of banks, privileged interlocutors of SMEs for financial needs, which are expanding their offer by adding insurance products. But there are also other players looking to access the commercial insurance market with different vehicles, such as managing general agents.